Contempt Order Upheld Against Swiss Bank Users

(CN) - A couple accused of a multimillion tax-evasion scheme was properly held in civil contempt for withholding Swiss bank account records, the 4th Circuit ruled.

Because the federal case is under seal in Alexandria, Va., the court identified the couple only as John and Jane Doe.

John Doe's business account at the Swiss investment bank Clariden Leu, now Credit Suisse AG, had a value of more than $2.3 million by the end of 2008, according to the undisputed record.

When he closed the account in January 2009, he transferred $1.5 million to its Swiss manager, Beck Verwaltungen AG, which had an account at a Swiss private bank, Bank Sarasin.

Years later, the U.S. government investigated to see whether the Does used the accounts to conceal assets and income from the Internal Revenue Service.

The Does were served grand jury subpoenas requesting that they produce certain of their account documents in the Eastern District of Virginia on May 18, 2012.

Uncle Sam wanted the couple to cough up the last five years' worth of records such as account types, numbers, maximum values, and holder names, as well as the names and addresses of the foreign banks. Treasury Department offshore banking laws require the maintenance of such records.

Citing their Fifth Amendment privilege against self-incrimination, the Does timely moved to quash the subpoenas.

In its opposition, the government argued that the privilege does not apply, under the required records doctrine, to financial records that the Does must retain by law.

A federal judge ultimately agreed denied the Does' motion and ordered them to comply with the subpoenas.

Though the couple refused and were held in civil contempt, the court deferred executing the contempt order pending review by the Richmond, Va.-based 4th Circuit.

A three-judge panel of that court affirmed the contempt finding Friday, saying that the subpoenas satisfied all elements of the required records doctrine.

The Does failed to convince the 4th Circuit that the purpose of the Bank Secrecy Act is prosecutorial and that its recordkeeping provision is criminal, not regulatory, in nature.

"Because the BSA's recordkeeping requirements serve purposes unrelated to criminal law enforcement and the provisions do not apply exclusively to those engaged in criminal activity, we find that those requirements are 'essentially regulatory,'" Judge G. Steven Agee wrote for the panel.

The records sought are of a kind "customarily kept," according to the ruling.

"The Does argue that individuals are unlikely to keep account records for the five years required under the Code of Federal Regulations, given the three-year statute of limitations for civil tax adjustments, and because foreign banks are notorious for failing to provide customers with records," Agee wrote. "This argument fails, however, given the clear language that requires the retention of the account information that has been subpoenaed. Because it is the failure to maintain such records that can be probative of criminal activity, rather than the contents of the records, foreign account holders can reasonably be expected to follow the law governing their choice to engage in offshore banking." (Emphasis in original).

The court also tossed aside the claim that a requirement to retain records does not entail a need to report their contents, finding that "the records in question have 'public aspects' sufficient to satisfy the third prong of the required records doctrine."

Holding that the Fifth Amendment privilege is inapplicable, the court declined to address the Does' request for immunity.

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